What You Should Do If You Are Daytrader?

Day trading refers to buying then selling or selling short then buying the same security on the same day. If you’ve ever thought about trying your own luck with day trading on the stock market, here are some important things you should know and do first:

1. Most day traders don’t make any money
It’s true: academic studies like this one show how hard it is to make a profit through day trading. As the study notes, 8 out of 10 day traders lose money – and while heavy day traders earn gross profits, that money is not enough to cover transaction costs.

2. You’re irrational
No matter how level-headed you think you are, when it comes to money, we have inherent behavioral biases that are nearly impossible to overcome. Academic studies have covered these at length – hindsight bias, loss aversion and plain old greed can lead us to make bad decisions when it comes to managing our money and buying and selling stocks.

3. You need to have money to burn
Or, at least you need to have enough money so that any losses won’t financially destroy you. The same goes for your emergency fund. And borrowing money to day trade is also pretty risky business.

4. You don’t get to keep all the money
As the academic paper referenced earlier found, most heavy traders don’t earn enough to cover their transaction costs. That’s because every time you buy or sell a security, you’re paying for the privilege. Transaction costs can vary depending on what platform you use.

5. You can’t predict the future
Day trading is essentially market timing. You make money when you anticipate what others are going to do and act first. Hit the buy or sell button too late and you can lose more money. The thing is, nobody can predict the future – you need to be able to handle the uncertainty and to stay calm in the meantime.

6. Avoid trading during the first 15 minutes of the market open
Those first 15 minutes of market action are often panic trades or market orders placed the night before. Novice day traders should avoid this time period while also looking for reversals. If you’re looking to make quick profits, it’s best to wait a while until you’re able to spot rewarding opportunities. Even many pros avoid the market open.

7. Have a selling plan
Many rookies spend most of their time thinking about stocks they want to buy without considering when to sell. Before you enter the market, you need to know in advance when to exit, hopefully with a profit. “Playing it by ear” is not a selling strategy, nor is hope. As a day trader, you’ll set a price target as well as a time target.

8. Keep a journal of all your trades
Many pros swear by their journal, where they keep records of all their winning and losing trades. Writing down what you did right, or wrong, will help you improve as a trader, which is your primary goal. Not surprisingly, you’ll probably learn more from your losers than your winners.

9. Practice day trading in a paper-trading account
Although not everyone agrees that practice trading is important, it can be beneficial to some traders. If you do open a practice account, be sure to trade with a realistic amount of money. It’s not helpful to practice trade with a million dollars if the most you have in your account is $30,000. Also, if you do practice trade, think of it as an educational exercise, not a game.

10. Never act on tips from uninformed sources
Most pros know that buy or sell signal based on tips from uninformed acquaintances will almost always lead to bad trades. Knowing what stocks to buy is not enough. You also have to know when to sell, and by then the tipster is long gone.

Why Do Many Forex Traders Always Lose Their Money? Part 2

Why Do Many Forex Traders Always Lose Their Money? Part 2

13. Not learning to trade the daily charts first

Be a huge proponent of focusing one’s market analysis efforts on the daily charts. I believe lower time frames have a lot of random price “noise” and give a much more difficult to interpret picture of the overall market structure than the daily charts do. I see no problem in trading the 4hr or 1hr charts, but I recommend all traders learn to master the daily charts first.

14. Thinking the Market is "Wrong"

The market, however, is never right or wrong – it simply is. If a trader is losing money trading a particular currency or stock, then that trader is wrong, not the market.

15. Expecting to get rich quick

This point sort of encompasses the others in that if you are over-trading, risking too much, or doing any of the other things discussed here, you are simply being greedy and trying to make as much money as fast as you can. Well, the fact of trading is that the “harder” you try to make money and the more you feel a need to make money in the markets, the worse you are probably going to do. FOREX Trading successfully requires a clear and relaxed mindset, one that does not care whether you win, lose or draw, because you know that over a given period of time you will make money if you trade in a discipline and controlled manner.

16. Incorrectly managing trades

Most traders mess up AFTER they enter their trades by meddling with their targets and stops or adding to positions unnecessarily. One of my core trading philosophies is to just “set and forget” your trades, because you are always going to be the most objective and clear-minded BEFORE you enter a trade rather than when the trade is live.

17. Gambling instead of trading

By gambling I mean trading without a proven high-probability trading edge. Many traders complain of losing money and yet they don’t even really have a definable trading strategy. Simply put, if you don’t know EXACTLY what you are looking for in the market you are never going to make money consistently, or at all.

18. Random Decisions/No Consistency

The market is either going to move up and down, so if you take an educated guess you should be able to make money. Well for those who have tried this will have no doubt discovered that lack of consistency in trading is not lucrative. Sure the market can only move in one direction, but for how long before it reverses. You get plenty of days where the market will move up, down, back up then down again. How many times would your stop have been triggered chasing price around like this? It would be super frustrating. Most people find Forex trading very attractive because it give a person complete control, breaking free of all the rules from their day to day life. Unfortunately the Forex market requires rules, structure and consistency at an even more intense level than your daily life does. So if you’re looking to operate “rule free”, then trading is probably not for you.

 

19. Trading Under Emotion

We already spoke about trading being the ultimate psychological challenge of life. A lot of the market participants are human aside from all the trading algorithms, so the market is one giant psychological machine. If you display emotional weakness, the market will exploit your emotions and use them against you, taking your hard earned money. A lot of traders take on Forex trading because they want to use it to fix some underlying financial problem in their life, or just want to generate fast money. Trading for the wrong reasons will make you vulnerable to emotional fueled mistakes because you’ve got “too much at stake”.

20. No Experience

Like any other profession, Forex is something that takes time. You can’t expect to walk into a job, inexperienced, and expect to be promoted to the manager the next day. Forex trading requires a learning phase essential to conditioning yourself, and to build a compatible mind-set for the markets. Trading is probably unlike anything you’ve ever experienced. Your day to day life does not prepare you for it. The logic learned from the outside world can’t be applied successfully to the markets, the two just don’t mix. Before throwing in large amounts of your savings into the markets, make sure you’ve had a good dose of experience first.

21. Trying to Understand too Many Things/Over Complication

If you make your trading complicated then you will end up becoming a vegetable. There is a huge amount of trading systems out there, and most of them are just too intense. Too many of these systems bring in all these extra external variables onto the charts. Things like indicators, expert advisors, economic figures or other “magic” trading tools. All the extra data on your chart makes the system confusing, overwhelming and frustrating. Multiple variables often conflicting with one another, so the more you bring in, the harder chart analysis becomes.

22. Not accepting that losing is part of winning

Many traders seem to have an innate ability to not want to accept that losing is part of the game of trading. They tend to place blame on the market, on their broker, on not having enough money in their accounts, or any number of other reasons. The simple fact of the matter is that you are going to lose trades no matter what you do. So, you better learn to accept this early on, embrace it, and figure out a way to incorporate losing into your trading plan. You can lose “successfully” by learning to take small losses relative to your rewards, never move your stop further from your entry, and always trade with a stop loss. There is usually no need to meddle with your trades. If you have pre-defined your risk then you should be OK with losing that amount of money, let the trade play out to either hit your pre-defined stop loss or move into profit. You need to do your work before you enter the market, not after.

Conclusions

Sadly, this list covers only a fraction of the multitude of mistakes made by forex traders. We hope this list is useful to you, and we look forward to working with you for a long time to come.

Why Do Many Forex Traders Always Lose Their Money? Part 1

Why Do Many Forex Traders Always Lose Their Money? Part 1

It's commonly known that most forex traders fail. In fact, it's estimated that 96 percent of forex traders lose money and end up quitting. To help you to be in that elusive 4 percent of winning traders, I have compiled a list of the most common reasons why forex traders lose money. Let’s study and learn all the reason listed here.

1. Low start up capital

You must have some money to make some money. It's possible for you to generate outstanding returns on limited capital in the short term. However, with only a small amount of capital and outsized risk, you will find yourself being emotional with each swing of the market and jumping in and out and the worst times possible.

2. Failure to manage risk

Risk management is a key to survival. You can be a very skilled trader and still be wiped out by poor risk management. Your number one job is not to make a profit, but rather to protect what you have. As your capital gets depleted, your ability to make a profit is lost.

3. Greed

Some traders are greedy. They feel that they need to squeeze every last pip out of a move because there is money to be made every day. Trying to grab every last pip before a currency pair turns can set you up to lose the profitable trade that you are sitting on.

4. Indecisive Trading

Sometimes you might find yourself suffering from trading remorse. This happens when a trade that you open isn't immediately profitable, and you start saying to yourself that you picked the wrong direction, and then you close your trade and reverse it, only to see the market go back in the initial direction that you chose.

5. Trying to pick tops or bottoms

Many new traders try to pick turning points in currency pairs. They will place a trade on a pair, and as it keeps going in the wrong direction, they continue to add to their position being sure that it is about to turn around this time. If you trade this way, in the end you end up with much more exposure than you planned, and a terribly negative trade.

6. Refusing to be wrong

Some trades just don't work out. It's human nature to want to be right, but sometimes we just aren't. As a trader, sometimes you have to just be wrong and move on, instead of clinging to the idea of being right and ending up with a blown account.

7. Buying a System

There are many "forex trading systems" for sale on the internet. Some traders are out there looking for the ever elusive "100 percent accurate forex trading system". They keep buying systems and trying them until finally giving up deciding that there is no way to win.

8. Over-trading

This one is pretty self-explanatory, but it’s also probably the number one reason why so many Forex traders fail to make money in the markets. If you are trading too often, you are going to deplete your trading account very fast. You need to only enter high-probability trade setups and have the patience to wait for them.

9. Failing to Consider All 3 Elements of a Trade

The Elements of a Trade
There are three equally essential elements to every trade, each equally important to the long-term success of a trader. Unfortunately, most new and unsuccessful traders only pay attention to one, or at most two of these elements. The three elements to every trade are as follows: (1) entry (the price at which the trade is entered), (2) stop (the price at which the trade is exited for a loss) and (3) target (the price at which the trade is exited for profit). All three are equally important to the success of the trader, but most new traders only pay attention to the entry, and maybe the stop.

10. Moving Your Stops

Now that we’ve discussed what stops are, and how they should be placed, we need to discuss another major mistake made by new traders when it comes to their stops. Nobody likes to be wrong, and nobody likes losing, but unfortunately, both being wrong and losing are a major part of being a forex trader. The problem that new traders (and even some more experienced traders) often encounter is that they let their aversion to being wrong and losing interfere with their trade setups. If a trader sets their stop correctly, at the invalidation level of their trade setup, there should never be any reason to move the stop.

11. Risking too much per trade

This one is also pretty self-explanatory. But, time and time again traders blow out their trading accounts because they “loaded up” on a trade that they were “sure” about. The truth is that you NEVER know for sure which trades will win and which trades will lose, even if you have a high-probability trading strategy and follow it religiously. For this reason, it is critical that you effectively manage your risk on EVERY single trade you take. Eventually, if you are managing your risk effectively on each trade and using a high-probability trading strategy, you will make money over time.

12. Not Having/Not Following a Trading Plan

A trading plan is essential for all traders, new and old. A trading plan should lay out not only the setups the trader will look to trade, but also the risk management strategy of the trader. For example, a trading plan should include weekly, monthly and quarterly pip targets, the maximum amount of capital a trader is willing to lose in a given week, month or quarter, the pairs a trader will be trading, the maximum number of trades a trader will take at one time, what he or she is looking for, how much they are willing to risk, and how much they are looking to make. and anything else that may be important to the success of the trader. Trading plans don’t need to be overly complicated, but they do need to be created and followed.